FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM
Commission File Number 0-11727
COOPER DEVELOPMENT COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 94-2876745
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2420 SAND HILL ROAD, SUITE 300
MENLO PARK, CA 94025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 233-2727
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1995
COMMON STOCK, $.10 PAR VALUE 3,629,376
<TABLE>
<CAPTION>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Three Months Ended Six Months Ended
June 30, July 31, June 30, July 31,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $4,774 $5,599 $10,857 $10,108
Cost of sales 2,530 3,075 5,247 4,972
------ ------ ------ ------
Gross profit 2,244 2,524 5,610 5,136
------ ------ ------ ------
Research and development expenses 186 272 370 434
Selling expenses 2,727 2,694 5,536 5,026
General and administrative expenses 1,764 1,834 3,659 3,700
Restructuring charges 1,395 - 1,395 -
Amortization of intangible assets 86 68 171 137
------ ------ ------ -------
Operating loss (3,914) (2,344) (5,521) (4,161)
Interest income 44 164 122 323
Interest expense (89) (69) (166) (130)
Other income (expense), net (588) (69) (305) 119
------- ------ ------- ------
Loss before income taxes (4,547) (2,318) (5,870) (3,849)
Income tax expense (4) (13) (10) (24)
------- ------ ------- -------
Net loss $(4,551) $(2,331) $(5,880) $(3,873)
======= ======= ======= =======
Net loss per share $ (1.25) $ (0.64) $ (1.62) $ (1.07)
Average number of shares outstanding
during the period 3,629 3,629 3,629 3,629
======= ======= ======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,888 $9,952
Accounts receivable, net 4,123 4,139
Other receivables 277 429
Inventories 7,087 6,009
Prepaid expenses 212 190
------ ------
Total current assets 15,587 20,719
Property, plant and equipment, net 2,714 2,808
Intangible assets, net 114 116
Excess cost over net assets acquired, net 4,500 4,667
Other assets 549 515
------ ------
$23,464 $28,825
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Short-term borrowings $ - $1,000
Notes payable to related parties 2,948 2,948
Accounts payable 4,108 3,822
Accrued expenses 6,518 5,633
Tax liabilities 6,272 6,386
------ ------
Total current liabilities 19,846 19,789
Other long-term liabilities 2,058 2,195
------ ------
Total liabilities 21,904 21,984
------ ------
Stockholders' equity:
Common stock, $.10 par value per share 447 447
Additional paid-in capital 68,580 68,580
Foreign currency translation adjustments 743 250
Accumulated deficit (63,548) (57,668)
Cost of shares held in treasury (4,662) (4,662)
Unrealized loss on marketable securities - (106)
------ ------
Total stockholders' equity 1,560 6,841
------ ------
$23,464 $28,825
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JULY 31,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net cash used by operating activities $(5,217) $(2,378)
Net cash used by discontinued operations - (522)
------- -------
Net cash used by operating activities (5,217) (2,900)
Cash flows from investing activities:
Cash acquired in CDSA transaction, net of
amount disbursed - 731
Purchases of fixed and intangible assets (497) (312)
Payments for the purchase of common stock rights - (464)
Proceeds from sale of properties 739 260
------- -------
Net cash provided by investing activities 242 215
Cash flows from financing activities:
Repayment of short-term borrowings (1,000) -
Repayments of other long-term liabilities (89) (761)
-------- -------
Net cash used by financing activities (1,089) (761)
Net decrease in cash and cash equivalents (6,064) (3,446)
Cash and cash equivalents at beginning of period 9,952 19,558
------- -------
Cash and cash equivalents at end of period $ 3,888 $16,112
======= =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIAREIS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INVENTORIES
Inventories as of June 30, 1995 consist of the following (in thousands):
Raw materials $2,907
Work-in-process 19
Finished goods 4,596
-----
Less inventory reserves 435
-----
$7,087
======
NOTE 2. RESTRUCTURING CHARGES
The Company has developed plans to reduce costs of goods and improve
productivity. As a result of these plans, the Company announced to its
employees that it will implement a restructuring program which involves
consolidation of several offices and manufacturing facilities into one newly
leased facility in Morgan Hill, California, relocations, separations, and
related costs. The consolidated condensed statement of operations includes
$1,395,000 of pretax charges relating to this program. Included in this amount
is $810,000 for the severance costs of 71 employees working in manufacturing,
distribution and administration at the Company's Islip New York facilities and
$585,000 related to facility leases and asset retirements. The closing of the
Islip facilities is to begin no earlier than September 30, 1995. The Company
has made no payments as yet for its restructuring program the cost of which is
included in accrued liabilities as of June 30, 1995. The Company expects such
payments to be completed by the end of the second quarter in 1996.
NOTE 3. MANAGEMENT REPRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all the adjustments necessary to present
fairly the Company's consolidated condensed financial position as of June 30,
1995 and December 31, 1994 and the consolidated condensed results of their
operations and cash flows for the six months ended June 30, 1995 and July 31,
1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
On December 20, 1994 the Company elected to change its fiscal year from
October 31 to December 31. The management discussion that follows compares the
three and six months ended June 30, 1995 to the three and six months ended July
31, 1994, the closest previous quarter reported upon.
Three and Six Months Ended June 30, 1995 Compared with Three and Six Months
Ended July 31, 1994
The Company's net sales for the three months ended June 30, 1995 were
$4,774,000 compared to net sales of $5,559,000 for the three months ended July
31, 1994. The decrease is primarily attributable to higher returns. Sales for
the six months ended June 30, 1995 increased $749,000 over the six months ended
July 31, 1994, primarily due to higher sales of the Company's anti-stress face
and bath pacs.
The gross profit percentage for the three months ended June 30, 1995
increased 2% as a percentage of net sales over the three months ended July 31,
1994 primarily due to lower inventory reserves recorded during the period ended
June 30, 1995 than during the period ended July 31, 1994.
Selling costs for the six months ended June 30, 1995 increased $510,000
over the six months ended July 31, 1994 primarily due to higher selling,
advertising and marketing costs.
Restructuring charges of $1,395,000 were recorded in the second quarter to
reflect the costs of closing down the Central Islip and Menlo Park facilities.
See note 2.
Other income (expense), net for the six months ended June 30, 1995 of
($588,000) includes an expense of $685,000 related to a change in estimated
liability for certain environmental clean-up costs, a $284,000 charge related to
foreign currency fluctuations, a $112,000 write down of an investment in
marketable securities, a gain of $338,000 for insurance recoveries related to
DES claims and a gain of $350,000 from the sale of property held by the
Company's wholly-owned subsidiary. Other income (expense), net for the six
months ended July 31, 1994 of ($305,000) includes one time expenses of $200,000
related to certain litigation and settlement costs, a gain of $131,000 related
to the sale of substantially all of the assets of the Bahamas facility, and
$127,000 of service fee revenue.
CAPITAL RESOURCES AND LIQUIDITY
The Company has experienced operating cash flow deficiencies for a number
of years and has relied upon asset sales and financing from stockholders to fund
liquidity needs. At June 30, 1995, current liabilities exceeded current assets
by $4,259,000 and cash required by operations was $5,217,000 for the six months
ended June 30, 1995. The Company expects a continuing deficiency in cash
generated from operations for the remainder of 1995.
The Company does not expect to generate positive cash flow from operations
for at least the remainder of 1995. Moreover, the Company does anticipate that
additional funds will need to be raised to supplement current cash levels in
order to meet its short-term liquidity issues and to fund the working capital
deficit.
Various plans, including the consolidation and relocation of certain
facilities, have been prepared to control the growth of or reduce operating
expenditures, as well as to improve gross margins and cash flows. To fund these
activities, as well as the cash flow deficiencies noted above, the Company will
attempt to obtain financing from its stockholders or other sources and sell non-
operating assets. No assurances can be given that the Company will be
successful in selling its non-operating assets or that financing will be
available on terms acceptable to the Company.
As reported in Note 2, the Company plans to consolidate certain facilities
and start in-house production of certain of its product lines. An accrual for
$1,395,000 has been recorded as of June 30, 1995 relating to the costs to close
down the facilities. No payments have been made against the restructuring
program.
The Company has incurred significant expense in connection with its attempt
to gain control of Avanza Corp. (``vanza'') and to finance the ongoing legal
challenges to Avanza's and certain of its officers and directors actions in
opposition thereto and may continue to incur additional expense in the future.
PART II
ITEM 5.OTHER INFORMATION
a) Settlement of Litigation
In June 1988, Berlex Laboratories, Inc. (`Berlex'') filed a number of related
actions in the Superior Court of New Jersey, the United States District Court
for the District of New Jersey, the United States District Court for the
District of Delaware, the United States District Court for the District of
Massachusetts, and the United States District Court for the District of the
Virgin Islands. Defendants in those actions are Cooper Holdings, Inc., Cooper
Development Company, The Cooper Companies, Inc., Cooper Life Sciences, Inc., The
First National Bank of Boston (``rustee''), solely in its capacity as Trustee
to the Cooper Laboratories, Inc. Liquidating Trust (``rust'') and various other
individual and corporate defendants (collectively, ``efendants'').
On April 17, 1995, the Company entered into an agreement with Berlex settling
all claims brought against the Company. The original claim sought cost recovery
for environmental claims and indemnification, if the need arose, with regard to
a pharmaceutical product. CDC paid Berlex a de minimis sum and Berlex agreed to
release CDC and dismiss all the pending court actions against the Company,
including environmental claims related to a Virgin Islands facility.
b) Submission of Matters to Vote of Security Holders
On April 26, 1995, the Company held an Annual Meeting of Stockholders for the
purpose of electing four directors to the Board of Directors. The four nominees
for election as directors were James E. Gilleran, Theodore H. Kruttschnitt,
Parker G. Montgomery and Jackson L. Schultz, all of whom were then current
members of the Board of Directors. Each of the nominees was reelected by at
least 3,361,764 votes, representing 93% of the 3,629,376 shares outstanding and
99% of the 3,405,531 shares cast. Voting results for the individual nominees
follows:
Nominee Votes in Favor Votes Against
------- -------------- -------------
James E. Gilleran 3,363,426 42,105
Theodore H. Kruttschnitt 3,363,531 42,000
Parker G. Montgomery 3,361,764 43,767
Jackson L. Schultz 3,363,411 42,120
c) Transfer to Nasdaq Small Cap Market
On March 24, 1995 trading of the Company's common stock transferred from the
Nasdaq National Market System to the Nasdaq Small Cap Market.
d) Compliance with Environmental Laws
CDC is increasing its reserve for the environmental clean up of one of its
former properties sold in 1986 to Cooper Technicon Inc. a former subsidiary of
CDC. The $685,000 increase to the reserve is based upon recent analytical
results showing an unexplained temporary, but localized, increase in containment
concentration at one monitoring well at the site. Based on these results, New
Jersey Department of Environmental Protection has required CDC to continue
operating its Phase I Groundwater Recover System for an indefinite period.
ITEM 6.
a) Exhibits - None
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter for which this report
is filed.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Cooper Development Company
--------------------------
(Registrant)
Date: August 10, 1995 By: MICHAEL J. BRADEN/S/
------------------------------
Michael J. Braden
Vice President and
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,888
<SECURITIES> 0
<RECEIVABLES> 5,805
<ALLOWANCES> 1,682
<INVENTORY> 7,087
<CURRENT-ASSETS> 15,587
<PP&E> 4,384
<DEPRECIATION> 1,670
<TOTAL-ASSETS> 23,464
<CURRENT-LIABILITIES> 19,846
<BONDS> 0
<COMMON> 447
0
0
<OTHER-SE> 1,113
<TOTAL-LIABILITY-AND-EQUITY> 23,464
<SALES> 10,857
<TOTAL-REVENUES> 10,857
<CGS> 5,247
<TOTAL-COSTS> 5,247
<OTHER-EXPENSES> 305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> (5,870)
<INCOME-TAX> 10
<INCOME-CONTINUING> (5,880)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,880)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> 0
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